Delphi Filing May Be Felt Through Industry

Delphi Corp.’s bankruptcy filing could change the face of the U.S. auto industry, ratcheting up the pressure to produce cheaper auto parts overseas and forcing unprecedented cuts in union wages and benefits, industry analysts and autoworkers said Sunday.

Delphi, the largest U.S. auto supplier, filed for bankruptcy protection Saturday and was expected to slash jobs and wages and close many of its 31 U.S. plants as part of its reorganization. General Motors Corp., Delphi’s largest customer and former parent, said it might have to assume as much as $11 billion in retirement benefits for Delphi’s union-represented employees.

But the ripple effects won’t end there. Delphi has 500 suppliers of its own that are waiting to see what kind of labor agreement Delphi negotiates with the United Auto Workers. Once a leaner Delphi emerges from bankruptcy protection, which is expected in 2007, its suppliers could face added pressure to lower their own costs through wage cuts or increased use of overseas labor.

“There’s a great deal of concern among auto suppliers about whether they can remain profitable or survive with union contracts,” said Jim Gillette, a supplier analyst at CSM Worldwide. “If Delphi’s willing to force renegotiation through a bankruptcy filing, I suspect other suppliers would do the same.”

Delphi’s bankruptcy case, which is expected to result in plant closures and layoffs, is one of the largest in U.S. history. The Troy, Mich.-based company has 50,000 U.S. employees.

Union members also are watching closely. Tonyia Young, a United Auto Workers member from Anderson, Ind., has worked for auto supplier Guide Corp. since 2002 and worries that the company will match changes in Delphi’s contracts because Delphi has a plant nearby. Guide, like Delphi, already has a two-tier wage agreement that allows it to pay newer hires such as Young about $15 an hour, $8 less than its older hires earn.

In a letter to UAW members last week, local union leaders in Indiana said Delphi wanted to cut hourly wages from $27 to $10 to $12, slash vacation time and make workers contribute more for their own healthcare.